Keppel Corp won't lose steam after $440m jack up orders

Order cycle "to stay robust," says OSK-DMG.

Following the announcement that Keppel secured two more jackup orders, bringing YTD new jackup rigs won to 12 units, OSK-DMG forecasted a bullish outlook for orders.

"We expect the jackup order cycle to stay robust, driven by ongoing fleet replacement for ageing fleet and a shortage of reliable rig-building capacity in China as Dalian has taken significant orders this year," it said.

Part of its optimism stems from reports that Transocean has spent more than USD2bn to add 10 new jackup rigs. "We believe Keppel is one of the strong frontrunners for the job. Also, we see a high possibility that the floating liquefied natural gas (FLNG) conversion orders from Golar and a drillship order could materialise in the next 12 months," said OSK-DMG.

Another catalyst for Keppel Corp is a foreseen climb in rig prices. "Excluding estimated project management fees of USD10m/rig, we estimate yard turnkey price at USD210m/rig, a slight improvement from the USD206m/rig ordered by Grupo R in July 2013," it said.

"We see the likelihood of rig prices strengthening on Dalian’s full orderbook and the tightening of China’s rig-building capacity due to ongoing credit concerns faced by weaker yards in China," it added.